IASB issues narrow-scope amendments for sale and leaseback transactions
On September 22, 2022, the International Accounting Standards Board (IASB) issued amendments to International Financial Reporting Standard (IFRS) 16, Leases. These amendments, entitled Lease Liability in a Sale and Leaseback (Amendments to IFRS 16), add to requirements explaining how a company accounts for a sale and leaseback after the date of the transaction.
Sale and leaseback transactions
A sale and leaseback is a transaction for which a company sells an asset and leases that same asset back from the new owner for a period of time.
IFRS 16 includes requirements on how to account for a sale and leaseback at the date the transaction takes place. However, before the September amendments, IFRS 16 had not specified how to measure the transaction subsequently, when reporting after that date. The amendments add to the sale and leaseback requirements in IFRS 16, thereby supporting the consistent application of IFRSs.
These amendments will not change the accounting for leases other than those arising in a sale and leaseback transaction.
The IFRS 16 amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The seller-lessee must apply these amendments retrospectively pursuant to the requirements in International Accounting Standard (IAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors, for sale and leaseback transactions entered into after the date of initial application.